Health Reform May Hurt Some Firms, Doctors

But the Clinton task force's plan may help the whole economy, if it controls soaring costs

THE transformation that the Clinton administration is considering for the health care system will create winners and losers across a landscape that fills a seventh of the United States economy.

The goal of the administration's task force on health care policy, chaired by Hillary Rodham Clinton, is to reduce the soaring costs of health care before they bury the economy as well as the federal budget. The task force also wants to provide coverage to 37 million underinsured or uninsured Americans.

To accomplish those goals, Mrs. Clinton's group is looking at three possible plans: employer mandates, managed competition, and direct cost controls.

At the task force's first public hearing March 29, small businesses emerged as the most vociferous opponents of mandates, because most of the nation's uninsured people are employed in businesses with less than 25 workers.

Small businesses have to pay far more than large corporations for health insurance, because they lack the bargaining power and administrative efficiency of big companies. Many are also operating closer to the margin of profitability.

If health-insurance mandates are imposed, many small-business employees will get coverage, but others risk layoffs or having to bear a high cost of insurance. The employers risk bankruptcy, industry representatives told the health-reform task force.

Of the 20 million people who work in the retail industry, a half million would lose their jobs in the first year of employer mandates, said Tracy Mullin, chief lobbyist of the National Retail Federation.

But not all businesses see mandates as a losing proposition. Private insurers currently pay increased costs as hospitals and physicians pass along their bills for treating the uninsured. If there are fewer uninsured, then those costs will be lower. Some doctors oppose plan

Managed competition is a more-radical change - one that is popular with some businesses but not with many doctors. Most versions rely on competition between full-service providers, such as health-maintenance organizations, to hold quality up and costs down. Individuals and small businesses could join insurance- purchasing groups to gain the advantages that large firms already have.

Managed competition would accelerate a two-decade-old trend of hospitals and doctors organizing into full-service health care providers. Doctors are steadily losing their independence as they accept both referrals and budget oversight from managed-care programs.

Hospitals are becoming more- integrated and efficient or closing down. Already, 12 percent of rural hospitals have disappeared. Hospitals in the United States already have about 40 percent more beds than they can fill, says Prof. Roger Battistella of Cornell University. That number will drop, he predicts.

"These are threatening situations to a lot of doctors," says Paul Feldstein, professor of management at the University of California at Irvine. "Physicians have never been monitored for quality or appropriateness before."

"Physicians are going to lose," says Leroy Schwartz, president of Health Policy International and a former medical doctor. "We may find ourselves with fees lowered and loss of autonomy."

Other losers under managed competition would include uncompetitive hospitals, including many teaching hospitals.

The country does not need 5,000 private hospitals, a half-million doctors, 20,000 nursing homes, 126 medical schools, and two-fifths of its hospitals to be teaching hospitals, Dr. Battistella says.

But, he adds, "in any threat to these hospitals, you are taking on the power base of American medicine."

To control costs, the health care community must get better information about what works by tracking patients over time. "In an age of scientific medicine, much of what we do is very ad hoc," Battistella says.

The big savings from managed competition depend on whether it can slow the cost of using advanced medical technology. Only 1 percent of the population incurs 30 percent of the medical costs, according to a Columbia University study. Much of that cost is for technologies that may prolong life by just a few months.

But Dr. Schwartz doubts that any of the steps the administration has discussed will benefit the economy or individual pocketbooks. "I don't think they're going to save money. I think they're going to spend money," he says. "We can't cover 37 million new people for the same price as when we're not covering them." Cost controls considered

In case Schwartz is right, the administration is considering direct cost controls either on insurance premiums, fees for health services, or budgets that cap state spending.

The immediate losers from cost controls are providers who are squeezed by their own rising costs and limits on what they can charge.

But skeptics note that hospitals and doctors have evaded such controls in the past. Physicians' fees were frozen for two years in the early 1980s, Robert Winters of the Business Roundtable noted March 29. Yet costs rose 29 percent in that period.

This is because when fees are capped, doctors find ways of requiring more services to sustain their incomes, Dr. Feldstein says.

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